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Question: Suppose and economy described by the Solow model has the following production function: Y=K^0.4(LE)^0.6

a) For this economy what is f(k) ?

b) Use your answer to part a). To solve for the steady state value of y as a function of exogenous variables s, n, g and d?

c) Two neighboring economies have the above production function, but they have different parameter values. Atlantis has a saving rate of 28%, and a population growth rate of 1% per year. Xanadu has a savings rate of 10% and a population growth rate of 4% per year. In both countries g=-0.02 and d=0.04. Find the steady state value of y for each country.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M93136401

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